With competitor Barnes & Noble preparing to close all but the last two of their B. Dalton mall stores by January, Borders announced after yesterday that they will close approximately 200 of the remaining mall-based Waldenbooks outlets in January. The move will leave Borders with about 130 mall-based locations remaining. The company estimates that 1,500 jobs–mostly part-time–will be eliminated as a result.
CEO Ron Marshall says, “We believe there remains an opportunity to profitably operate a much smaller Waldenbooks segment that complements our core Borders superstore business and continues to serve readers in their communities. Through this right-sizing, we will reduce the number of stores with operating losses, reduce our overall rent expense and lease-adjusted leverage and generate cash flow through sales and working capital reductions.” The company notes that the remaining Waldenbooks stores will finally be integrated into the Borders superstore computer system.
The multiple rounds of Borders management have been back-and-forth on the “right-sizing” of the obviously outmoded, sprawling string of mall stores for years now. At first the conversion to Borders Express was going to save them. Then the George Jones crew meant to eliminate 250 Walden stores starting in spring 2007, but they reigned in those closure plans.
The company has closed approximately 45 Waldens already just since late August, after shuttering 112 stores in fiscal 2008. For the last full fiscal year, reported April 1, the mall stores generated sales of $480 million. When making that report, the company had indicated 240 of those store leases were up for renewal over the next year and many were likely to be closed. Saying “it’s not a particularly attractive business,” the company indicated the segment could ultimately shrink to between 50 and 100 stores.
Yesterday afternoon a Borders employee forum posted internal talking points about the store closures prior to the public disclosure, now removed from that site. Among the anonymous comments posted, one employee reiterated allegations posted recently the superstore closings in January will also be announced by the end of this month. (One post asserted that up to 25 percent or more superstores could be set for elimination.) Spokesperson Mary Davis tells us, “We have no plans to make an announcement of any large-scale superstore closings. As always, we assess our stores on an ongoing basis and make decisions on a store by store basis.” (According to the company’s most recent annual report, the substantial majority of their superstore leases do not expire until 2015 or later. Only 11 store leases are up by early next year, and 26 in 2011.)
In the first half of fiscal 2009, Waldenbooks generated $151.4 million in sales, down from $193 million for the previous year. In very rough terms, publishers can expect to have lost something like $320 million in sales to BGI across the full fiscal year from the Walden downsizing. Barnes & Noble’s virtual elimination of B. Dalton’s hurts less, though the 52 remaining stores have generated $21.4 million in sales over six months, for approximately $50 million in lost annual revenues for publishers.
The press release says Walden will “become smaller, more profitable chain,” though the parent company has not been profitable for years now. Of the company’s reported operating loss for the first half of 2009 of $55.9 million, Waldenbooks comrised $9.9 million of that loss.